020 7898 0500Trade talks between the US and China began in earnest yesterday and it is fair to say the markets reacted in lukewarm fashion. Nobody is entirely sure which way the talks will go and it is feared that if negotiations break down then it could spark a full-blown trade war. However, the fact that the two largest economic powers in the world are sitting down to discuss trade is surely a positive, although that’s not to say the eventual outcome will be.
The balance of trade for March came in better than expected, as the deficit narrowed to $49 billion against an expectation of $50 billion. While that is certainly a positive, it is worth pointing out that the previous month’s deficit of $57.7 billion was the highest since October 2008 so it was reasonable to expect a narrowing. Perhaps that explains why the dollar didn’t perform too well yesterday, losing its earlier gains against the pound.
Composite and manufacturing PMI both came in better than expected, although non-manufacturing PMI for April came in at 56.8 against an expectation of 58.1. Still, all readings point to healthy growth and the news should be received positively. Initial jobless claims were forecast to come in at 225,000 but the figure was actually 211,000.
Today we will see non-farm payrolls and the unemployment rate for April. We could see some dollar movement following the release, although the trade talks are most likely to grab the headlines.
